The Lure of Casinos by Robert Goodman and Stephen Simurda

Governor Deval Patrick faces daunting budget challenges and a political agenda that includes repairing infrastructure throughout the state, improving public education and providing some financial relief to cities and towns. The prospect of hundreds of millions of dollars a year in revenue from gambling casinos must be tempting. Not only would three new casinos bring in new revenue, but they would also allow the commonwealth to trap all those dollars being spent by Massachusetts residents who now travel to Connecticut when they want to place their bets. But like the gambler who hopes to wipe out his debts with one big score (and rarely does), Patrick and other state politicians may want to look at the consequences of relying on casinos to solve budget problems.

Casinos can bring the state lots of revenue – over $400 million a year is projected. And many Massachusetts residents will likely change their gambling venues and opt to lose their money closer to home if the three casinos the governor is proposing are built. But at the same time those casinos may cost the state even more money in lost business and tax revenues, hurt other businesses throughout the state, and create costs for taxpayers that result from an increase in problem gambling.

If casinos become available in the state, more Massachusetts residents will gamble. This will divert discretionary spending away from other businesses. Dollars spent at casinos will be dollars not spent in restaurants, furniture and clothing stores, movie theaters, and many other businesses. Even revenue for the state lottery could be expected to decline. Research by William Thompson of the University of Nevada estimated that with the introduction casino-style gambling in Pennsylvania, “local areas will lose approximately $267 million annually from their local economies.”

According to many studies, the closer a casino is to where people live; the more likely they are to develop gambling problems. Research done for the 1999 National Gambling Impact Study Commission found that “the availability of a casino within 50 miles is associated with about double the prevalence of problem and pathological gamblers.” The Commission also reported that the average cost of each of these gamblers to other residents and businesses in a state, in terms of lost productivity, unemployment and welfare benefits, health care, and other activities is approximately $2,000 per year. And that doesn’t take into account the costs of the problem gambler’s unpaid debts, bankruptcies and white-collar crimes, such as embezzlement and insurance and credit card fraud, and the criminal justice costs of prosecution.

The Commission concluded that in four New England states, including Massachusetts, 4.2 percent of residents (273,000 in the Commonwealth) are at risk of becoming problem or pathological gamblers. The math is simple: 273,000 Massachusetts residents multiplied by $2,000 equals $546 million a year in costs. In addition, according to a number of researchers and therapists, although problem gamblers are a small percentage of the population, they account for as much as 25 to 50 percent of a casino’s revenues.

Of course, not all of those at risk will develop gambling problems, but with casinos closer to home many will. And taxpayers and business people who may never set foot in a casino will end up paying for it. Add to this the economic loss to other businesses in the state that depend on discretionary spending and the additional costs of unpaid debts and white-collar crimes, and it’s not hard to envision casinos doing more harm than good to the state’s financial well being.

Massachusetts political and business leaders would do well to examine the experiences of other states that have dealt with casinos. In Iowa, less than four years after casinos were legalized, problem gambling more than tripled. In South Dakota, five years after casinos opened in the town of Deadwood, the state’s attorney testified before a congressional committee about the large numbers of people who had no previous criminal record who had since turned to crime to cover gambling losses. And after years of concerns about the consequences of casinos in Connecticut, legislators there recently voted to initiate a major gambling impact study.

Before the first person loses a dollar in Massachusetts slot machine, Governor Patrick and the state’s legislators need to make sure they know the gamble they are really taking. It’s too easy to simply rely on the fantasy of an easy score.

–Robert Goodman is the author of The Luck Business and was former director of the United States Gambling Research Institute (USGRI). He teaches public policy and environmental design at Hampshire College in Amherst.

–Stephen J. Simurda was associate director of the USGRI and teaches journalism at the University of Massachusetts, Amherst.